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Icahn Drops Out of Eastern Bidding for Now

May 9, 1989

NEW YORK (AP) _ Trans World Airlines Inc. announced Tuesday that it is not prepared at this time to submit a formal bid for strikebound Eastern Airlines.

Takeover strategist Carl C. Icahn, the owner and chairman of TWA, has held numerous discussions with officials of Eastern’s unions and had been widely expected to make a bid for the Miami-based airline. TWA said in a statement it needs more time to discuss with its unions the feasibility of integrating the two carriers’ workforces.

U.S. Bankruptcy Judge Burton R. Lifland has set Wednesday as a deadline for all interested bidders to submit their offers for Eastern or its Northeast shuttle service to the federal bankruptcy court, which must approve any sales.

Eastern has been in Chapter 11 bankruptcy protection from creditors since March 9, five days after the start of a Machinists union strike that was supported by pilots and flight attendants.

In a separate development, Eastern and the American Society of Travel Agents agreed on a proposed plan to reimburse travel agents for cash refunds on Eastern tickets given to customers before March 10. At a news conference in New York, they asked the bankruptcy court to approve the plan.

TWA reiterated possible interest in bidding for Eastern’s airport hub in Philadelphia and said it may, ″from time to time, express an interest in other assets of Eastern.″

However, the airline said, ″Unless and until TWA’s unions agree ..., TWA will not be able to make a bid for Eastern.″

The issue of integrating the two unions and determining seniority rankings has been an issue in discussions between Icahn and Eastern’s unions, according to sources close to the situation. It is an especially sore point for the Eastern pilots, for whom seniority is a more crucial issue than their fellow Machinists or flight attendants, the sources said.

Partly for that reason, the Eastern pilots union has appeared to favor billionaire hotel mogul Jay Pritzker, who already has submitted a formal n New York for the Air Line Pilots Association.

Other potential bidders include a group led by former airline executive William Howard and investment firm Prudential-Bache Securities Inc., and another consortium led by Joseph Ritchie, a prominent Chicago commodities trader.

Developer Donald Trump has agreed to buy Eastern’s profitable shuttle service for $365 million, but the deal still awaits approval by the bankruptcy court. America West Airlines last week offered $726 million for the shuttle routes and landing slots, along with 10 Boeing 757 jetliners.

Eastern management insists that the airline is not for sale and is proceeding with its recently announced plan to rebuild as a smaller carrier and raise $1.8 billion by selling aircraft and other assets.

TWA’s announcement reinforces Eastern’s contention that there are ″no bona fide bidders″ for the airline, said Art Kent, a spokesman in Houston for Eastern’s parent Texas Air Corp.

Icahn could be holding back on the assumption that no serious offers will be made, and he could then pounce on Eastern, suggested some sources who asked not to be identified by name.

Others suggested he made the announcement Tuesday, rather than on the deadline day of Wednesday, to put pressure on the unions to reach agreement with him and allow time for him to change his mind about a bid.

Some observers expect Icahn to bid for NWA Inc., the parent of Northwest Airlines, which is the target of several takeover suitors. Pan Am Corp. announced Tuesday that it is considering an offer for the much larger NWA.

TWA General Counsel Mark Buckstein acknowledged the possibility that TWA’s unions might reach an accord with the airline in the near future, and TWA might then ″seek an opportunity to bid″ after the judge’s deadline. However, TWA won’t submit a bid by the deadline of Wednesday at 5 p.m. EDT, Buckstein told The Associated Press.

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